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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Highcroft Investments Plc | LSE:HCFT | London | Ordinary Share | GB0004254875 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 587.50 | 550.00 | 625.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Investment Trust | 5.61M | -7.12M | -1.3667 | -4.30 | 30.59M |
From Apr 2019 to Apr 2024
TIDMHCFT
RNS Number : 6551T
Highcroft Investments PLC
22 March 2019
Highcroft Investments PLC
Preliminary results for the year ended 31 December 2018
KEY HIGHLIGHTS
-- 5.8% increase in gross property income to GBP5,043,000 (2017 GBP4,765,000) -- 0.8% increase in investment property valuation to GBP77,700,000 (2017 GBP77,113,000) -- Property acquisitions of GBP5,226,000 (net of costs) and disposal proceeds of GBP6,145,000 -- 4.0% increase in net asset value per share to 1207p (2017 1161p) -- 28.0% decrease in earnings per share to 95.3p (2017 132.3p) -- 34.7% increase in Adjusted earnings per share to 87.3p (2017 64.8p) -- Medium-term debt unchanged at GBP19,400,000; net gearing 23% (2017 29%) -- Cash and liquid equity investments GBP5,881,000 (2017 GBP4,035,000) -- 12.5% increase in final dividend to 33.75p per share (2017 30.0p per share) -- 13.5% increase in total dividend to 52.50p per share (2017 46.25p per share)
Dear Shareholder,
Introduction
I am very pleased to be delivering another strong set of results. There is no doubt that 2018 has been a year of prolonged political and economic uncertainty, and even against the backdrop of protracted Brexit negotiations the company is reporting continued net property income growth of 7.8%, total shareholder return of 5.2% and a 13.5% increase in the total dividend to 52.50 pence per share.
Property portfolio
We purchased one freehold leisure asset during the year. This was financed by a combination of existing cashflow and recycled cash from two property sales and from equity sales. We sold one additional asset in December 2018 at a premium of 34.6% to the June valuation. This sale at such a significant premium to book value is a reflection of our ability to read the market and move swiftly to capitalise on opportunistic situations when they arise. At the year-end our portfolio value comprised 72% industrial/retail warehouses, and the remainder split between well-let retail, leisure and offices. We are also pleased to report that we sold our last residential asset during the year.
Gross property rental growth of 5.8% for the year remains robust and follows a particularly strong 2017. Contracted rent at the year-end was 1.2% up on the previous year-end; however, this was masked by the sale of our Southampton asset close to the year-end with an annual rent of GBP184,000. Adjusting back for this would have given an increase of 4.9%.
At the year-end we held a cash balance of GBP5.2m, along with a liquid equity portfolio of GBP679,000 (sold post year-end for GBP724,000) and undrawn banking facilities of GBP10.6m. This gives the company in excess of GBP15m capacity to take advantage of opportunities as they arise in 2019. The company takes a prudent view of bank leverage and, even if fully drawn, this facility would have accounted for less than 35% of the property portfolio value.
We have stringent criteria for new tenant acceptance and, at the year-end, all properties were fully let to a strong tenant base. Through a combination of stable income yields and active asset management, I am pleased to report a 4.0% increase in net asset value and an 8.1% return on equity for the year.
People
I would like to thank the team for their continued hard work throughout the year during challenging market conditions. We have a small but dedicated and experienced team at Highcroft and this sets us in good stead for the year ahead. The board supports the principles of good corporate governance, so, in order to ensure that we comply insofar as is practicable with the principles of the 2018 UK Corporate Governance Code, we are proposing to introduce a new incentive plan for the executive directors in order to further align their interests with those of the shareholders.
Dividend
The company's interim dividend was increased by 15.4% and, because of good revenue growth, efficient use of debt and containing our administration costs, we have increased the final dividend to 33.75 pence per share giving a total dividend of 52.50 pence per share, an increase of 13.5%. Our stated strategy is to increase dividends in excess of inflation each year and I am pleased to say we have delivered this every year since we converted to a REIT.
Outlook
Highcroft is well-positioned with a high quality income-producing portfolio. However, we expect 2019 to be another challenging year. We operate in a very competitive landscape with continuing political and economic uncertainty, particularly around Brexit and its potential effects on market sentiment and tenants' ability to continue to pay our rents. We therefore remain cautious and diligent in our approach to ensuring we select the right properties to deliver long-term shareholder value.
This announcement contains inside information for the purpose of Article 7 of Regulation (EU) No 596/2014.
Charles Butler
Chairman
22 March 2019
Enquiries:
Highcroft Investments PLC
Charles Butler / Roberta Miles
01865 840023
Panmure Gordon (UK) Limited
Fabien Holler
0207 886 2500
Consolidated statement of comprehensive income
for the year ended 31 December 2018
Hot Features
Premium
Note 2018 2017
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gross rental revenue 5,043 - 5,043 4,765 - 4,765
Property operating expenses (184) - (184) (259) - (259)
-------- -------- -------- -------- -------- --------
Net rental income 4,859 - 4,859 4,506 - 4,506
Net gains on disposal
of investment property 967 - 967 1 - 1
--------
Valuation gains on investment
property - 2,600 2,600 - 3,365 3,365
Valuation losses on investment
property - (2,116) (2,116) - (77) (77)
-------- -------- -------- -------- -------- --------
Net valuation gains on
investment property - 484 484 - 3,288 3,288
-------- -------- -------- -------- -------- --------
Dividend revenue 54 - 54 92 - 92
Gains on equity investments - 48 48 - 230 230
Losses on equity investments - (166) (166) - (91) (91)
-------- -------- -------- -------- -------- --------
Net investment income 54 (118) (64) 92 139 231
-------- -------- -------- -------- -------- --------
Administration expenses (736) - (736) (663) - (663)
-------- -------- -------- -------- -------- --------
Net operating profit before
net finance income 5,144 366 5,510 3,936 3,427 7,363
-------- -------- -------- -------- -------- --------
Finance income 6 - 6 2 - 2
Finance expense (705) - (705) (651) - (651)
Net finance expense (699) - (699) (649) - (649)
--------
Profit before tax 4,445 366 4,811 3,287 3,427 6,714
Income tax credit 1 67 48 115 61 60 121
Total profit and comprehensive
income for the year attributable
to the owners of the parent 4,512 414 4,926 3,348 3,487 6,835
-------- -------- -------- -------- -------- --------
Basic and diluted earnings
per share 95.3p 132.3p
Consolidated statement of financial position
at 31 December 2018
Note 2018 2017
GBP'000 GBP'000
Assets
Non-current assets
Investment property 4 77,700 76,315
Equity investments 5 679 2,131
-------- --------
Total non-current assets 78,379 78,446
-------- --------
Current assets
Investment property - 798
Trade and other receivables 471 537
Cash and cash equivalents 5,202 1,904
--------
Total current assets 5,673 3,239
Total assets 84,052 81,685
-------- --------
Liabilities
Current liabilities
Trade and other payables 2,235 2,054
-------- --------
Total current liabilities 2,235 2,054
-------- --------
Non-current liabilities
Interest bearing loan 6 19,400 19,400
Deferred tax liabilities 33 254
-------- --------
Total non-current liabilities 19,433 19,654
-------- --------
Total liabilities 21,668 21,708
Net assets 62,384 59,977
Equity
Issued share capital 1,292 1,292
Revaluation reserve - property 18,770 18,015
- other 574 538
Capital redemption reserve 95 95
Realised capital reserve 28,378 26,611
Retained earnings 13,275 13,426
-------- --------
Total equity attributable
to the owners of the parent 62,384 59,977
--------
Consolidated statement of changes in equity
2018 Issued Revaluation Capital Realised Retained
reserves
share Property Other redemption capital earnings Total
capital reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2018 1,292 18,015 538 95 26,611 13,426 59,977
-------- --------- -------- ----------- --------- --------- --------
Transactions with
owners:
Dividends - - - - - (2,519) (2,519)
-------- --------- -------- ----------- --------- --------- --------
Reserve transfers:
Non-distributable
items recognised
in income statement:
Revaluation gains/(losses) - 484 (121) - - (363) -
Tax on revaluation
gains - - 48 - - (48) -
Realised gains/(losses) - - - - 969 (969) -
Movement in deferred
tax on realisation
of equities - - 1,161 - (1,161) - -
Surplus attributable
to assets sold
in the year - (907) (1,052) - 1,959 - -
Excess of cost
over revalued
amount taken to
retained earnings - 1,178 - - - (1,178) -
-------- --------- -------- ----------- --------- --------- --------
- 755 36 - 1,767 (2,558) -
-------- --------- -------- ----------- --------- --------- --------
Total comprehensive
income for the
year - - - - - 4,926 4,926
-------- --------- -------- ----------- --------- --------- --------
At 31 December
2018 1,292 18,770 574 95 28,378 13,275 62,384
======== ========= ======== =========== ========= ========= ========
2017 Issued Revaluation Capital Realised Retained
reserves
share Property Other redemption capital earnings Total
capital reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2017 1,292 14,276 659 95 27,020 11,983 55,325
-------- --------- -------- ----------- --------- --------- --------
Transactions with
owners:
Dividends - - - - - (2,183) (2,183)
-------- --------- -------- ----------- --------- --------- --------
Reserve transfers:
Non-distributable
items recognised
in income statement:
Revaluation gains - 3,288 124 - - (3,412) -
Tax on revaluation
gains - - 64 - - (64) -
Realised gains - - - - 16 (16) -
(Surplus)/loss
attributable to
assets sold in
the year - 734 (309) - (425) - -
Excess of cost
over revalued
amount taken to
retained earnings - (283) - - - 283 -
- 3,739 (121) - (409) (3,209) -
-------- --------- -------- ----------- --------- --------- --------
Total comprehensive
income for the
year - - - - - 6,835 6,835
-------- --------- -------- ----------- --------- --------- --------
At 31 December
2017 1,292 18,015 538 95 26,611 13,426 59,977
======== ========= ======== =========== ========= ========= ========
Consolidated statement of cash flows
for the year ended 31 December 2018
2018 2017
GBP'000 GBP'000
Operating activities
Profit before tax on ordinary activities 4,811 6,714
Adjustments for:
Net valuation gains on investment property (484) (3,288)
Net gain on disposal of investment property (967) (1)
Net gain/(loss) on investments 118 (139)
Finance income (6) (2)
Finance expense 705 651
Operating cash flow before changes in
working capital and provisions 4,177 3,935
Decrease in trade and other receivables 66 94
Increase in trade and other payables 89 196
-------- ---------
Cash generated from operations 4,332 4,225
Finance income 6 2
Finance expense (705) (651)
Income taxes paid (13) (8)
-------- ---------
Net cash flows from operating activities 3,620 3,568
-------- ---------
Investing activities
Purchase of non-current assets - investment
property (5,226) (10,086)
- equity investments - -
Sale of non-current assets - investment
property 6,090 2,259
- equity investments 1,333 477
-------- ---------
Net cash flows from investing activities 2,197 (7,350)
-------- ---------
Financing activities
Dividends paid (2,519) (2,183)
New bank borrowings - 4,500
-------- ---------
Net cash flows from financing activities (2,519) 2,317
-------- ---------
Net increase/(decrease) in cash and
cash equivalents 3,298 (1,465)
Cash and cash equivalents at 1 January 1,904 3,369
-------- ---------
Cash and cash equivalents at 31 December 5,202 1,904
-------- ---------
Notes
for the year ended 31 December 2018
1 Income tax credit
2018 2017
GBP'000 GBP'000
Current tax:
On revenue profits 67 61
On capital profits - (3)
67 58
Deferred tax 48 63
-------- --------
Income tax credit 115 121
-------- --------
The tax assessed for the year differs from the standard rate of corporation tax in the UK of 19% (2017 19%).
The differences are explained as follows:
2018 2017
GBP'000 GBP'000
Profit before tax 4,811 6,714
-------- --------
Profit before tax multiplied by the
standard rate of corporation tax
in the UK of 19% (2017 19%) 914 1,276
Effect of:
Tax exempt revenues 13 (40)
Profit not taxable as a result of
REIT status (1,199) (1,481)
Chargeable gains more than accounting
profit 172 55
Use of management expenses 20 82
Change in deferred tax liability (48) (13)
Adjustment in respect of previous 13 -
years
Income tax credit (115) (121)
-------- --------
2 Dividends
In 2018 the following dividends have been paid by the company:
2018 2017
GBP'000 GBP'000
2017 Final: 30.0p per ordinary share
(2016 26.0p) 1,550 1,343
2018 Interim: 18.75p per ordinary
share (2017 16.25p) 969 840
----------- -----------
2,519 2,183
----------- -----------
The directors recommend a property income distribution of GBP1,744,000, 33.75p per share (2017 GBP1,550,000, 30.0p per share) payable on 31 May 2019 to shareholders registered at 3 May 2019.
3 Earnings per share
The calculation of earnings per share is based on the total profit for the year of GBP4,926,000 (2017 GBP6,835,000) and on 5,167,240 shares (2017 5,167,240) which is the weighted average number of shares in issue during the year ended 31 December 2018 and throughout the period since 1 January 2017. There are no dilutive instruments.
In order to draw attention to the profit which is not due to the impact of valuation gains and losses, which are included in the statement of comprehensive income but not available for distribution under the company's articles of association, an adjusted earnings per share based on the profit available for distribution of GBP4,512,000 (2017 GBP3,348,000) has been calculated.
2018 2017
GBP'000 GBP'000
Earnings:
Basic profit for the year 4,926 6,835
Adjustments for:
Net valuation gains on investment
property (484) (3,288)
Losses/(gains) on investments 118 (139)
Income tax on (profits)/losses (48) (60)
----------------- ------------------
Adjusted earnings 4,512 3,348
----------------- ------------------
Per share amount:
Earnings per share (unadjusted) 95.3p 132.3p
Adjustments for:
Net valuation gains on investment
property (9.4p) (63.6p)
Losses/(gains) on investments 2.3p (2.7p)
Income tax on profit (0.9p) (1.2p)
----------------- ------------------
Adjusted earnings per share 87.3p 64.8p
----------------- ------------------
4 Investment property
2018 2017
GBP'000 GBP'000
Total valuation at 1 January 77,113 65,997
Additions 5,226 10,086
Disposals (5,123) (2,258)
Revaluation gains 484 3,288
----------- -----------
Valuation at 31 December 77,700 77,113
----------- -----------
Less property categorised as current
asset - (798)
----------- -----------
Property categorised as fixed asset 77,700 76,315
----------- -----------
In accordance with IAS 40 the carrying value of investment properties is their fair value as determined by external valuers. This valuation has been conducted by Knight Frank LLP, as external valuers, and has been prepared as at 31 December 2018, in accordance with the Appraisal & Valuation Standards of the Royal Institution of Chartered Surveyors, on the basis of market value. This value has been incorporated into the financial statements at fair value categorised with level 2 inputs.
The independent valuation of all property assets uses market evidence and also includes assumptions regarding income expectations and yields that investors would expect to achieve on those assets over time. Many external economic and market factors, such as interest rate expectations, bond yields, the availability and cost of finance and the relative attraction of property against other asset classes, could lead to a reappraisal of the assumptions used to arrive at current valuations. Significant increases or decreases in estimated rental value and rent growth per annum in isolation would result in a significantly lower or higher fair value.
5 Equity investments
2018 2017
GBP'000 GBP'000
Valuation at 1 January 2,131 2,469
Disposals (1,331) (459)
(Loss)/surplus on revaluation in
excess of cost (121) 124
Revaluation decrease below cost - (3)
Valuation at 31 December 679 2,131
-------- --------
6 Interest bearing loans
2018 2017
GBP'000 GBP'000
Medium-term bank loans 19,400 19,400
-------- --------
The medium-term bank loans comprise amounts
falling due as follows:
Between one and two years 4,000 -
Between two and five years 7,500 4,000
Over five years 7,900 15,400
-------- --------
19,400 19,400
-------- --------
7 Basis of preparation
The preliminary announcement has been prepared in accordance with applicable accounting standards as stated in the financial statements for the year ended 31 December 2017. The accounting policies remain unchanged.
8 Annual General Meeting
The Annual General Meeting will be held on 16 May 2019.
9 Publication of non-statutory accounts
The above does not constitute statutory accounts within the meaning of the Companies Act 2006. It is an extract from the full accounts for the year ended 31 December 2018 on which the auditor has expressed an unmodified opinion and does not include any statement under section 498 of the Companies Act 2006. The accounts will be posted to shareholders on or before 23 April 2019 and subsequently filed at Companies House.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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